What changed in this filing

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Item 1. Financial Statements

2024-08-08 compared with 2024-05-08 · 323 added, 212 removed, 742 unchanged (42% of the section changed)

4 unchanged sentences

Three Months Ended

Six Months Ended

Net operating revenues:

10 unchanged sentences

Selling, general and administrative expenses

Operating loss

Operating income (loss)

Other income (expense):

1 unchanged sentence

Other income, net

Loss before income taxes

Income (loss) before income taxes

Provision for income taxes

Net income (loss)

Less net loss attributable to non-controlling interest in subsidiaries

Net loss attributable to Avalon Holdings Corporation common shareholders

Loss per share attributable to Avalon Holdings Corporation common shareholders:

Basic net loss per share

Weighted average shares outstanding - basic

Net income (loss) attributable to Avalon Holdings Corporation common shareholders

Income (loss) per share attributable to Avalon Holdings Corporation common shareholders:

Basic and diluted net income (loss) per share

Weighted average shares outstanding - basic and diluted

See accompanying notes to unaudited condensed consolidated financial statements .

44 unchanged sentences

(in thousands, except for share data)

For the Three Months Ended March 31, 2024

For the Three Months Ended June 30, 2024

Non-controlling

Shareholders'

Balance at April 1, 2024

Net Income (loss)

Balance at June 30, 2024

For the Three Months Ended June 30, 2023

Non-controlling

Shareholders'

Balance at April 1, 2023

Balance at June 30, 2023

See accompanying notes to unaudited condensed consolidated financial statements

AVALON HOLDINGS CORPORATION AND SUBSIDIARIES

Condensed Consolidated Statement of Shareholders ’ Equity (Unaudited)

(in thousands, except for share data)

For the Six Months Ended June 30, 2024

Non-controlling

Shareholders'

Balance at January 1, 2024

Balance at March 31, 2024

For the Three Months Ended March 31, 2023

Balance at June 30, 2024

For the Six Months Ended June 30, 2023

Non-controlling

2 unchanged sentences

Stock options - compensation costs

Balance at March 31, 2023

Balance at June 30, 2023

See accompanying notes to unaudited condensed consolidated financial statements

2 unchanged sentences

(in thousands)

Three Months Ended March 31,

Six Months Ended June 30,

Cash flows from operating activities:

Reconciliation of net loss to cash used in operating activities:

Reconciliation of net loss to cash provided by operating activities:

Depreciation and amortization expense

19 unchanged sentences

Cash flows from financing activities:

Principal payments on term loan facilities

Borrowings under line of credit facility

Principal payments on term loan facilities

Principal payments on finance lease obligations

Net cash provided by (used in) financing activities

Decrease in cash, cash equivalents and restricted cash

Net cash used in financing activities

Increase in cash, cash equivalents and restricted cash

Cash, cash equivalents and restricted cash at beginning of period

5 unchanged sentences

Operating lease right-of-use assets in exchange for lease obligations

Finance lease obligations incurred

Finance lease obligation incurred

Cash paid during the period for interest

3 unchanged sentences

Notes to Unaudited Condensed Consolidated Financial Statements

March 31, 2024

June 30, 2024

Description of Business

4 unchanged sentences

In addition, Avalon owns Avalon Resorts and Clubs, Inc.

(“ARCI”), which includes the operation and management of four golf courses and associated clubhouses, athletic and fitness centers, tennis courts, salon and spa services, dining and banquet facilities.

ARCI also owns and operates a hotel and its related resort amenities including dining, banquet and conference facilities, salon and spa services, fitness center, outdoor resort pool, Roman Bath, indoor junior Olympic size swimming pool and tennis courts.

5 unchanged sentences

All significant intercompany accounts and transactions have been eliminated in consolidation.

In the opinion of management, these unaudited condensed consolidated financial statements include all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of the financial position of Avalon as of March 31, 2024, and the results of its operations and cash flows for the interim periods presented.

In the opinion of management, these unaudited condensed consolidated financial statements include all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of the financial position and results of operations of Avalon for the interim periods presented.

The operating results for the interim periods are not necessarily indicative of the results to be expected for the full year.

The condensed consolidated financial statements presented herein reflect our current estimates and assumptions that affect the reported amounts of assets and liabilities and related disclosures as of the date of the financial statements and reported amounts of revenues and expenses during the reporting periods presented.

Approximately $ 0.1 million of other income on the unaudited condensed consolidated statement of operations for 2023 has been reclassified to conform to the presentation for 2024.

Approximately $ 0.2 million of other income on the unaudited condensed consolidated statements of operations for 2023 has been reclassified to conform to the presentation for 2024.

Such reclassifications had no effect on changes in operations.

Recent Accounting Pronouncements

As of March 31, 2024, there were several new accounting pronouncements issued by the FASB.

Each of these pronouncements, as applicable, has been or will be adopted by the Company.

Management does not believe the adoption of any of these accounting pronouncements has had or will have a material impact on the Company’s condensed consolidated financial statements.

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280), Improvements to Reportable Segment Disclosures, to improve disclosures about a public entity’s reportable segments and provide additional information about a segment’s expenses.

Disclosures and reconciliations required under ASC 280 are effective for fiscal years beginning after December 15, 2023 and for interim periods beginning after December 15, 2024 with early adoption permitted.

The Company is currently evaluating the adoption of this pronouncement and does not expect the adoption to have a material impact on the Company’s financial position, results of operations or financial disclosures.

In December 2023, The FASB issued ASU 2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures, to improve income tax disclosures around effective tax rates and cash income taxes paid.

ASU-2023-09 is effective for public entities for annual periods beginning after December 15, 2024 (calendar year 2025).

Cash, Cash Equivalents and Restricted Cash

5 unchanged sentences

Restricted cash consists of loan proceeds deposited into a project fund account to fund costs associated with the renovation and expansion of The Grand Resort and Avalon Field Club at New Castle in accordance with the provisions of the loan and security agreement (See Note 9).

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the Condensed Consolidated Balance Sheets that sum to the total of the same such amounts shown in the Condensed Consolidated Statements of Cash Flows.

Cash, cash equivalents and restricted cash consist of the following at March 31, 2024 and December 31, 2023 (in thousands):

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the Condensed Consolidated Balance Sheets of which the sum total equal amounts shown in the Condensed Consolidated Statements of Cash Flows.

Cash, cash equivalents and restricted cash consist of the following at June 30, 2024 and December 31, 2023 (in thousands):

Cash and cash equivalents

6 unchanged sentences

Revenue is measured as the amount of consideration we expect to receive in exchange for transferring goods or providing services.

Sales and other taxes we collect concurrent with revenue-producing activities are excluded from revenue as the Company is a pass-through conduit for collecting and remitting sales taxes.

Sales and other taxes we collect concurrent with revenue-producing activities are excluded from revenue.

The Company does not incur incremental costs to obtain contracts or costs to fulfill contracts that meet the criteria for capitalization.

12 unchanged sentences

Operations of the salt water injection wells have been suspended in accordance with the Chief of the Division of Oil and Gas Resources Management order (See Note 15).

Due to the suspension of the salt water injection wells, there were no operating revenues for the three months ended March 31, 2024 and 2023.

For the three months ended March 31, 2024 and 2023, the net operating revenues related to waste management services represented approximately 66 % and 69 %, respectively, of Avalon’s total consolidated net operating revenues.

For the three months ended March 31, 2024, one customers accounted for 14 % of the waste management services segment’s net operating revenues to external customers and 9 % of the consolidated net operating revenues.

For the three months ended March 31, 2023, two customers accounted for 32 % of the waste management services segment’s net operating revenues to external customers and 22 % of the consolidated net operating revenues.

Due to the suspension of the salt water injection wells, there were no operating revenues for the three and six months ended June 30, 2024 and 2023.

For the three months ended June 30, 2024 and 2023, the net operating revenues related to waste management services represented approximately 53 % and 49 %, respectively, of Avalon’s total consolidated net operating revenues.

Net operating revenues related to waste management services represented approximately 59 % and 58 % of Avalon’s total consolidated net operating revenues for the six months ended June 30, 2024 and 2023, respectively.

For the six months ended June 30, 2024, one customer accounted for 10 % of the waste management services segment’s net operating revenues to external customers and 6 % of the consolidated net operating revenues.

For the six months ended June 30, 2023, two customers accounted for 25 % of the waste management services segment’s net operating revenues to external customers and 14 % of the consolidated net operating revenues.

For our waste management services contracts, the customer contracts with us to provide a series of distinct waste management services over time which integrates a set of tasks (i.e.

6 unchanged sentences

The Company applied the standard's practical expedient that permits the omission of disclosures relating to unsatisfied performance obligations as most of the Company’s waste management service contracts (i) have an original expected length of one year or less and (ii) the Company recognizes revenue at the amount to which the Company has the right to invoice for services performed.

Avalon evaluated whether we are the principal (i.e.

report revenues on a gross basis) or agent (i.e.

report revenues on a net basis).

Avalon reports waste management services on a gross basis, that is, amounts billed to our customers are recorded as revenues, and amounts paid to vendors for providing those services are recorded as operating costs.

As principal,

Avalon is primarily responsible for fulfilling the promise to provide waste management services for the customer.

10 unchanged sentences

Golf and Related Operations

Avalon’s golf and related operations include the operation and management of four golf courses and associated clubhouses, recreation and fitness centers, tennis courts, salon and spa services, dining and banquet facilities.

The golf and related operations also include the operation of a hotel and its related amenities including dining, banquet and conference facilities, fitness center, indoor junior Olympic size swimming pool and tennis courts.

1 unchanged sentence

Due to adverse weather conditions, net operating revenues relating to the golf courses, which are located in northeast Ohio and western Pennsylvania, were minimal during the first three months of 2024 and 2023.

For the three months ended March 31, 2024 and 2023, the net operating revenues related to the golf and related operations represented approximately 34 % and 31 %, respectively, of Avalon’s total consolidated net operating revenues.

For both the three months ended March 31, 2024 and 2023, no one customer individually accounted for 10% or more of Avalon’s golf and related operations segment revenues.

For the three months ended June 30, 2024 and 2023, the net operating revenues related to the golf and related operations represented approximately 47 % and 51 %, respectively, of Avalon’s total consolidated net operating revenues.

For the six months ended June 30, 2024 and 2023, the net operating revenues related to the golf and related operations represented approximately 41 % and 42 %, respectively of Avalon’s total consolidated net operating revenues.

For both the six months ended June 30, 2024 and 2023, no one customer individually accounted for 10% or more of Avalon’s golf and related operations segment revenues.

For Avalon’s golf and related operations, the Avalon Golf and Country Club offers membership packages for use of the country club facilities and its related amenities.

19 unchanged sentences

Amounts paid in advance, such as deposits on overnight lodging or for banquet or conferences facilities, are recorded as a liability until the goods or services are provided to the customer (see Contract Liabilities below).

The following table presents our net operating revenues disaggregated by revenue source for the three months ended March 31, 2024 and 2023 (in thousands).

The following table presents our net operating revenues disaggregated by revenue source for the three and six months ended June 30, 2024 and 2023 (in thousands).

Sales and other taxes are excluded from revenues.

Three Months Ended

Six Months Ended

Waste management and brokerage services

14 unchanged sentences

The amounts due are stated at their net realizable value.

At March 31, 2024 and December 31, 2023, accounts receivable, net, related to our waste management services segment were approximately $ 9.0 million and $ 8.4 million, respectively.

At March 31, 2024, one customer accounted for approximately 14 % of the waste management services segment’s receivables and 9 % of the consolidated receivables.

At June 30, 2024 and December 31, 2023, accounts receivable, net, related to our waste management services segment were approximately $ 9.1 million and $ 8.4 million, respectively.

At June 30, 2024, one customer accounted for approximately 14 % of the waste management services segment’s receivables and 10 % of the consolidated receivables.

At December 31, 2023, no one customer accounted for 10% or more of the waste management service’s segment or consolidated net receivables.

Accounts receivable, net, related to our golf and related operations segment were approximately $ 3.3 million and $ 1.1 million at March 31, 2024 and December 31, 2023, respectively.

No one customer of the golf and related operations segment accounted for 10% or more of Avalon’s golf and related operations segment or consolidated net receivables at March 31, 2024 or December 31, 2023.

Accounts receivable, net, related to our golf and related operations segment were approximately $ 2.4 million and $ 1.1 million at June 30, 2024 and December 31, 2023, respectively.

No one customer of the golf and related operations segment accounted for 10% or more of Avalon’s golf and related operations segment or consolidated net receivables at June 30, 2024 or December 31, 2023.

The Company maintains an allowance for credit losses to provide for the estimated amount of receivables that will not be collected.

3 unchanged sentences

Payments subsequently received on such receivables are credited to the allowance for credit losses, or to income, as appropriate under the circumstances.

Allowance for credit losses was approximately $ 0.3 million at both March 31, 2024 and December 31, 2023.

The following table presents changes in our allowance for credit losses during the three months ended March 31, 2024 and 2023 (in thousands):

Allowance for credit losses was approximately $ 0.3 million at both June 30, 2024 and December 31, 2023.

The following table presents changes in our allowance for credit losses during the three and six months ended June 30, 2024 and 2023 (in thousands):

Beginning of Period

1 unchanged sentence

Allowance for credit losses

Three months ended March 31, 2024

Three months ended March 31, 2023

Three months ended June 30, 2024

Three months ended June 30, 2023

Six months ended June 30, 2024

Six months ended June 30, 2023

Contract Assets

2 unchanged sentences

Contract assets related to unbilled membership dues are classified as current as revenue related to such agreements is recognized within the annual membership period.

Unbilled membership receivables in our Condensed Consolidated Balance Sheets were approximately $ 0.8 million at March 31, 2024 and $ 0.6 million at December 31, 2023.

The following table presents changes in our contract assets during the three months ended March 31, 2024 and 2023 (in thousands):

Unbilled membership receivables in our Condensed Consolidated Balance Sheets were approximately $ 1.1 million at June 30, 2024 and $ 0.6 million at December 31, 2023.

The following table presents changes in our contract assets during the three and six months ended June 30, 2024 and 2023 (in thousands):

Beginning of Period

2 unchanged sentences

Unbilled membership dues receivable

Three months ended March 31, 2024

Three months ended March 31, 2023

Three months ended June 30, 2024

Three months ended June 30, 2023

Six months ended June 30, 2024

Six months ended June 30, 2023

Contract Liabilities

2 unchanged sentences

We classify deferred membership dues revenue as current based on the timing of when we expect to recognize revenue for the membership commitment based on the Company satisfying the stand ready performance obligation throughout the annual membership period.

The unrecognized or deferred revenues related to membership dues in our Condensed Consolidated Balance Sheets were approximately $ 5.2 million at March 31, 2024 and $ 3.4 million at December 31, 2023, respectively.

The unrecognized or deferred revenues related to membership dues in our Condensed Consolidated Balance Sheets were approximately $ 5.9 million at June 30, 2024 and $ 3.4 million at December 31, 2023, respectively.

Customer advance deposits are recorded as a liability until the goods or services are provided to the customer.

1 unchanged sentence

The unrecognized revenues related to customer advance deposits are recorded in “Other liabilities and accrued expenses” in our Condensed Consolidated Balance Sheets.

Customer advance deposits were approximately $ 1.3 million at March 31, 2024 and $ 1.2 million at December 31, 2023.

The following table presents changes in our contract liabilities during the three months ended March 31, 2024 and 2023 (in thousands):

Customer advance deposits were approximately $ 1.3 million at June 30, 2024 and $ 1.2 million at December 31, 2023.

The following table presents changes in our contract liabilities during the three and six months ended June 30, 2024 and 2023 (in thousands):

Beginning of Period

2 unchanged sentences

Deferred membership dues revenue

Three months ended March 31, 2024

Three months ended March 31, 2023

Three months ended June 30, 2024

Three months ended June 30, 2023

Six months ended June 30, 2024

Six months ended June 30, 2023

Customer advance deposits

Three months ended March 31, 2024

Three months ended March 31, 2023

Three months ended June 30, 2024

Three months ended June 30, 2023

Six months ended June 30, 2024

Six months ended June 30, 2023

Property and Equipment

5 unchanged sentences

The cost of assets retired or otherwise disposed of and the related accumulated depreciation is eliminated from the accounts in the year of disposal.

Property and equipment at March 31, 2024 and December 31, 2023 consists of the following (in thousands):

Property and equipment at June 30, 2024 and December 31, 2023 consists of the following (in thousands):

Land and land improvements

5 unchanged sentences

Property and equipment, net

At March 31, 2024, the Company did not have any significant fixed contractual commitments for construction projects.

At June 30, 2024, the Company did not have any significant fixed contractual commitments for construction projects.

Avalon reviews the carrying value of its long-lived assets whenever events or changes in circumstances indicate that its carrying amount may not be recoverable.

3 unchanged sentences

or if quoted market prices are not available, Avalon would discount the expected estimated future cash flows.

During the first three months of 2024 and 2023, no triggering events were present.

During the first six months of 2024 and 2023, no triggering events were present.

Operating Leases

Avalon leases golf carts and associated GPS equipment, furniture and fixtures for The Grand Resort and office copiers under operating leases.

Avalon leases golf carts, machinery and equipment for the landfill operations, furniture and fixtures for The Grand Resort and office copiers under operating leases.

Our operating leases have remaining lease terms ranging from less than 1 year to 5.0 years.

The weighted average remaining lease term on operating leases was approximately 3.0 years and 3.4 years at March 31, 2024 and December 31, 2023, respectively.

During the first three months of 2024 the Company did not record any new operating lease right-of-use assets or corresponding obligations under operating leases.

During the first three months of 2023, the Company recorded operating lease right-of-use assets and corresponding obligations under the operating leases of $ 35,000 .

Leased property and associated obligations under operating leases at March 31, 2024 and December 31, 2023 consists of the following (in thousands):

The weighted average remaining lease term on operating leases was approximately 2.6 years and 3.4 years at June 30, 2024 and December 31, 2023, respectively.

During the first six months of 2024 the Company did not record any new operating lease right-of-use assets or corresponding obligations under operating leases.

During the first six months of 2023, the Company recorded operating lease right-of-use assets and corresponding obligations under the operating leases of approximately $ 47,000 .

Leased property and associated obligations under operating leases at June 30, 2024 and December 31, 2023 consists of the following (in thousands):

Operating lease right-of-use assets

2 unchanged sentences

Total obligations under operating leases

The weighted average discount rate on operating leases was 5.9 % at both March 31, 2024 and December 31, 2023.

The weighted average discount rate on operating leases was 5.9 % at both June 30, 2024 and December 31, 2023.

Finance Leases

4 unchanged sentences

Based upon the amount of leasehold improvements already made, Avalon expects to exercise all its remaining renewal options.

At March 31, 2024 there were approximately 29.6 years remaining on the golf course and related facilities finance lease.

At June 30, 2024 there were approximately 29.3 years remaining on the golf course and related facilities finance lease.

At December 31, 2023 there were approximately 29.8 years remaining on the golf course and related facilities finance lease.

In addition, the Company also entered into lease agreements for a vehicle, golf course maintenance and restaurant equipment which were determined to be finance leases.

At March 31, 2024, the vehicle, golf course maintenance and restaurant equipment have remaining lease terms ranging from less than 1 year to 4.8 years.

The weighted average remaining lease term on the vehicles and equipment leases was approximately 3.4 years and 3.7 years at March 31, 2024 and December 31, 2023, respectively.

Leased property and associated obligations under finance leases at March 31, 2024 and December 31, 2023 consists of the following (in thousands):

The net asset value of finance leases, excluding leasehold improvements was $ 0.7 million and $ 0.8 million at June 30, 2024 and December 31, 2023, respectively.

In addition, the Company also entered into lease agreements for a vehicle, golf course maintenance and the captive landfill operations entered into lease agreements for equipment which were determined to be finance leases.

At June 30, 2024, the vehicles, golf course maintenance and restaurant equipment and the landfill operations equipment have remaining lease terms ranging from less than 1 year to 4.5 years.

The weighted average remaining lease term on the vehicles and equipment leases was approximately 3.5 and 3.4 years at June 30, 2024 and December 31, 2023.

Leased property and associated obligations under finance leases at June 30, 2024 and December 31, 2023 consists of the following (in thousands):

Leased property under finance leases

4 unchanged sentences

Total obligations under finance leases

The weighted average discount rate on finance leases was 6.3 % at both March 31, 2024 at December 31, 2023, respectively.

For the three months ended March 31, 2024 and 2023, components of lease expense were as follows (in thousands):

The weighted average discount rate on finance leases was 6.5 % at June 30, 2024 and 6.3% at December 31, 2023.

For the three and six months ended June 30, 2024 and 2023, components of lease expense were as follows (in thousands):

Three Months Ended

Six Months Ended

Operating lease cost:

4 unchanged sentences

Total finance lease cost

For the twelve months ending March 31, future commitments under long-term, operating and finance leases are as follows (in thousands):

For the twelve months ending June 30, future commitments under long-term, operating and finance leases are as follows (in thousands):

Total lease payments

2 unchanged sentences

Long-term portion of obligations under leases

Basic and Diluted Net Loss per Share

Basic net loss per share attributable to Avalon Holdings Corporation common shareholders is computed by dividing the net loss by the weighted average number of common shares outstanding.

For both the three months ended March 31, 2024 and 2023, the weighted average number of common shares outstanding was 3,899,431 .

Basic and Diluted Net Income (Loss) per Share

Basic net income (loss) per share attributable to Avalon Holdings Corporation common shareholders is computed by dividing the net income (loss) by the weighted average number of common shares outstanding.

For both the three and six months ended June 30, 2024 and 2023, the weighted average number of common shares outstanding was 3,899,431 .

Diluted net loss per share attributable to Avalon Holdings Corporation common shareholders is computed by dividing net loss attributable to Avalon Holdings Corporation common shareholders by the weighted average number of common shares outstanding plus any weighted common equivalent shares determined to be outstanding during the period using the treasury method.

Any weighted common equivalent shares included in the calculation are related to stock options granted by Avalon where the weighted average market price of Avalon’s common stock for the period presented is greater than the option exercise price of the stock option.

For the three months ended March 31, 2024 there was no outstanding options, therefore, no dilution.

For the three months ended March 31, 2023 the diluted per share amount reported is equal to the basic per share amount because Avalon was in a net loss position and as a result, such dilution would be considered anti-dilutive.

For the both the three and six months ended June 30, 2024 there were no outstanding options, therefore, no dilution.

For the three and six months ended June 30, 2023, the diluted per share amount reported is equal to the basic per share amount because Avalon was in a net loss position and as a result, such dilution would be considered anti-dilutive.

Term Loans and Line of Credit Agreements

3 unchanged sentences

The remaining proceeds of approximately $ 10.4 million were deposited into a project fund account for which those proceeds are to fund future costs of renovating and expanding both The Grand Resort and Avalon Field Club at New Castle.

At March 31, 2024 and December 31, 2023 the balance of “Restricted Cash” is $ 10.2 million and $ 10.3 million, respectively, and presented in the Consolidated Balance Sheets.

At June 30, 2024 and December 31, 2023 the balance of “Restricted Cash” is $ 10.2 million and $ 10.3 million, respectively, and presented in the Consolidated Balance Sheets.

The monies are earning nominal interest.

11 unchanged sentences

The 2022 Term Loan also contains other nonfinancial covenants, customary representations, warranties and events of default.

Avalon was in compliance with the 2022 Term Loan Agreement covenants at March 31, 2024 and December 31, 2023.

Avalon was in compliance with the 2022 Term Loan Agreement covenants at June 30, 2024 and December 31, 2023.

The Company capitalized approximately $ 0.6 million of debt issuance costs in connection with the 2022 Term Loan Agreement in accordance with ASC Subtopic 470-50, Debt-Modifications and Extinguishments .

2 unchanged sentences

Line of Credit Agreement

On May 31, 2018, Avalon entered into a business loan agreement with Premier Bank (the “Line of Credit Agreement”) which provides for a line of credit of up to $ 5.0 million.

On May 31, 2018, Avalon entered into a business loan agreement with Premier Bank (formerly Home Savings Bank), (the “Line of Credit Agreement”) which provides for a line of credit of up to $ 5.0 million.

On September 18, 2023, the Company amended the Line of Credit Agreement to extend the maturity date to July 31, 2025.

Under the Line of Credit Agreement, borrowings in excess of $ 1.0 million are subject to a borrowing base which is calculated based off a specific level of eligible accounts receivable of the waste management business as defined in the agreement.

At both March 31, 2024 and December 31, 2023, approximately $ 3.2 million was outstanding under the Line of Credit Agreement.

At March 31, 2024 and December 31, 2023, approximately $ 1.8 million was available under the Line of Credit Agreement.

At June 30, 2024 and December 31, 2023, approximately $ 3.2 million was outstanding under the Line of Credit Agreement.

At June 30, 2024 and December 31, 2023, approximately $ 1.8 million was available under the Line of Credit Agreement.

Outstanding borrowings under the Line of Credit Agreement bear interest at Prime Rate plus .25 %.

At March 31, 2024, the interest rate on the Line of Credit Agreement was 8.75 %.

At June 30, 2024, the interest rate on the Line of Credit Agreement was 8.75 %.

Borrowings under the Line of Credit Agreement are secured by certain business assets of the Company including accounts receivable, inventory and equipment.

1 unchanged sentence

The Line of Credit Agreement also contains other nonfinancial covenants, customary representations, warranties and events of default.

Avalon was in compliance with the Line of Credit Agreements covenants at March 31, 2024 and December 31, 2023.

During the three months ended March 31, 2024 and 2023, the weighted average interest rate on outstanding borrowings was 6.27 % and 6.10 %, respectively.

Obligations under the Company’s term loan agreement at March 31, 2024 and December 31, 2023 consist of the following (in thousands):

March 31, 2024

Avalon was in compliance with the Line of Credit Agreements covenants at June 30, 2024 and December 31, 2023.

During the six months ended June 30, 2024 and 2023, the weighted average interest rate on outstanding borrowings was 6.27 % and 6.16 %, respectively.

Obligations under the Company’s debt agreements at June 30, 2024 and December 31, 2023 consist of the following (in thousands):

June 30, 2024

Debt Issuance Costs

7 unchanged sentences

Long-term debt

Obligations under the Company’s Line of Credit agreement at both March 31, 2024 and December 31, 2023 were approximately $ 3.2 million, respectively, which matures on July 31, 2025.

For the twelve months ending March 31, future maturities under the Company’s 2022 Term Loan and Line of Credit Agreements are as follows (in thousands):

During the three months ended March 31, 2024 and 2023, net loss attributable to Avalon Holdings Corporation shareholders was $ 1.0 million and $ 1.7 million, respectively.

Avalon recorded a state income tax provision in both the three month periods ended March 31, 2024 and 2023, which was related entirely to the waste management and brokerage operations.

Due to the recording of a full valuation allowance against the Company’s federal net deferred tax assets, the overall effective tax rate in both periods reflects taxes owed in certain U.S state jurisdictions.

Avalon’s income tax benefit on the loss before taxes was offset by a change in the valuation allowance.

Obligations under the Company’s Line of Credit agreement at June 30, 2024 and December 31, 2023 were approximately $ 3.2 million, respectively, which matures on July 31, 2025.

For the twelve months ending June 30, future maturities of long-term debt are as follows (in thousands):

During the three months ended June 30, 2024, net income attributable to Avalon Holdings Corporation shareholders was $ 1.0 million compared to a net loss attributable to Avalon Holdings Corporation shareholders of $ 0.2 million during the three months ending June 30, 2023.

During the six months ended June 30, 2024, net loss attributable to Avalon Holdings Corporation shareholders was $ 25,000 compared to a net loss attributable to Avalon Holdings Corporation shareholders of $ 1.8 million during the six months ended June 30, 2023.

Avalon recorded a state income tax provision in both the three and six month periods ended June 30, 2024 and 2023, which was related entirely to the waste management and brokerage operations.

Due to the recording of a full valuation allowance against the Company’s federal and state net deferred tax assets, the overall effective tax rate in both periods reflects taxes owed in certain U.S state jurisdictions.

Avalon’s income tax on the income (loss) before taxes was offset by a change in the valuation allowance.

A valuation allowance is provided when it is more likely than not that deferred tax assets relating to certain federal and state loss carryforwards will not be realized.

26 unchanged sentences

Treasury securities over a period consistent with the expected term.

At March 31, 2024, all options to purchase shares granted were cancelled as the options did not meet the predetermined stock price within the three years following the contractual vesting period.

At June 30, 2024, all options to purchase shares granted were cancelled as the options did not meet the predetermined stock price within the three years following the contractual vesting period.

Additionally, all remaining shares previously granted expired.

At March 31, 2024 there are no outstanding options.

At June 30, 2024 there are no outstanding options.

The stock options vest and become exercisable based upon achieving two critical metrics as follows:

15 unchanged sentences

96 months after Grant Dates

During the three months ending March 31, 2024 there were no options outstanding and therefore compensation costs were $ 0 .

For the three months ending March 31, 2023 compensation costs were approximately $ 1,000 , based upon the estimated grant date fair value calculations.

As of March 31, 2024, there were no unrecognized compensation costs related to non-vested share-based compensation arrangements granted under the Plan.

For the three months ended June 30, 2024 and 2023 there were no compensation costs.

For the six months ended June 30, 2023, compensation costs were approximately $ 1,000 .

For the six months ended June 30, 2024, there were no unrecognized compensation costs related to non-vested share-based compensation arrangements granted under the Plan.

Legal Matters

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Avalon does not have operations located outside the United States and, accordingly, geographical segment information is not presented.

For the three months ended March 31, 2024, one customer accounted for 14 % of the waste management services segment’s net operating revenues to external customers and 10 % of the consolidated net operating revenues.

The accounting policies of the segments are consistent with those described for the consolidated financial statements in the summary of significant accounting policies included in Avalon’s 2023 Annual Report to Shareholders.

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Three Months Ended

Six Months Ended

Net operating revenues from:

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External customer revenues

Intersegment revenues

Total waste management services

Golf and related operations:

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Total net operating revenues

Three Months Ended

Six Months Ended

Income (loss) before income taxes:

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Golf and related operations

Segment income (loss) before income taxes

Segment income before income taxes

Corporate interest expense, net

Corporate other income, net

General corporate expenses

Loss before income taxes

Income (loss) before income taxes

Identifiable assets:

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Elimination of intersegment receivables

In comparing total assets at March 31, 2024 with those at December 31, 2023, the increase in the total assets of the waste management services segment of approximately $ 2.1 million was primarily a result of an increase accounts receivable and intersegment transactions, which are eliminated in consolidation.

The increase in total assets of the golf and related operations segment of $ 2.1 million was primarily due to an increase in accounts receivable, inventory and capital expenditures associated with The Grand Resort, partially offset by current year depreciation on property and equipment.

The decrease in corporate total assets of approximately $ 1.1 million was primarily due to a decrease in both operating cash and intersegment transactions, which are eliminated in consolidation.

In comparing total assets at June 30, 2024 with those at December 31, 2023, the increase in the total assets of approximately $ 3.8 million was primarily a result of an increase in accounts receivable associated with the waste segment, intersegment transactions, which are eliminated in consolidation and capital expenditures associated with The Grand Resort and Avalon Dermatology, LLC.

Certain Relationships and Related Transactions

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As a result of a private placement offering, Avalon is not the majority owner of AWMS Holdings, LLC.

At March 31, 2024 and December 31, 2023, respectively, Avalon owns approximately 47 % of AWMS Holdings, LLC.

At June 30, 2024 and December 31, 2023, respectively, Avalon owns approximately 47 % of AWMS Holdings, LLC.

In accordance with ASC 810-10 and related amendment , due to the managerial control of American Water Solutions, LLC, AWMS Holdings, LLC is a VIE, and the financial statements of AWMS Holdings, LLC and subsidiaries are included in Avalon’s consolidated financial statements.

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The amount of net loss attributable to the noncontrolling interest is recorded in “net loss attributable to noncontrolling interest” in our Condensed Consolidated Statements of Operations.

Avalon’s net loss attributable to the noncontrolling interest in AWMS Holdings, LLC was $ 0.1 million during each of the three months ending March 31, 2024 and 2023, respectively.

During the three months ended June 30, 2024 and 2023, net loss attributable to the noncontrolling interest in AWMS Holdings, LLC was $ 11,000 and $ 34,000 , respectively.

During the six months ended June 30, 2024 and 2023, net loss attributable to the noncontrolling interest in AWMS Holdings, LLC was $ 37,000 and $ 103,000 , respectively.

Avalon Med Spa, LLC

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Avalon operates and manages all decisions regarding the medical spa operations for a percentage of the gross revenues.

In 2021, Avalon made a capital contribution totaling $ 359,000 , which included cash and certain equipment, in exchange for membership units of Avalon Med Spa, LLC.

Through a private placement offering for the purchase of membership units, Avalon Med Spa, LLC raised $ 358,000 from accredited investors in August 2021.

In March 2022, Avalon and accredited investors made additional capital contributions of $ 143,000 and $ 142,000 , respectively.

In 2021, Avalon made a capital contribution totaling $ 0.4 million, which included cash and certain equipment, in exchange for membership units of Avalon Med Spa, LLC.

Through a private placement offering for the purchase of membership units, Avalon Med Spa, LLC raised $ 0.4 million from accredited investors in August 2021.

In March 2022, both Avalon and accredited investors made additional capital contributions of $ 0.1 million, respectively.

An outside director of Avalon, who qualified as an accredited investor, invested less than 10 % of the total investment in Avalon Med Spa, LLC.

Avalon is the majority owner of Avalon Med Spa, LLC owning 50.1 % of the company at both March 31, 2024 and December 31, 2023.

Avalon is the majority owner of Avalon Med Spa, LLC owning 50.1 % of the company at both June 30, 2024 and December 31, 2023.

In accordance with ASC 810-10 and related amendment , Avalon Med Spa, LLC is a VIE, and the financial statements of Avalon Med Spa, LLC are included in Avalon’s consolidated financial statements.

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The amount of net loss attributable to the noncontrolling interest is recorded in “net loss attributable to noncontrolling interest” in our Condensed Consolidated Statements of Operations.

Avalon’s net loss attributable to the noncontrolling interest in Avalon Med Spa, LLC was $ 0.1 million during each of the three months ending March 31, 2024 and 2023, respectively.

During the three months ended June 30, 2024 and 2023, net loss attributable to the noncontrolling interest in Avalon Med Spa, LLC was approximately $ 35,000 and $ 17,000 , respectively.

During the six months ended June 30, 2024 and 2023, net loss attributable to the noncontrolling interest in Avalon Med Spa, LLC was approximately $ 84,000 and $ 71,000 , respectively.

Avalon Dermatology, LLC

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An outside director of Avalon, who qualified as an accredited investor maintains 49.9 % of the total ownership in Avalon Dermatology, LLC.

Avalon is the majority owner of Avalon Dermatology, LLC owning 50.1 % of the company at March 31, 2024.

In March 2024, Avalon made capital contributions of approximately $ 0.2 million, which included building improvements and the purchases of certain equipment, in exchange for membership units of Avalon Dermatology, LLC.

At March 31, 2024 Avalon Dermatology, LLC was not in operation.

The operating results will be included in Avalon’s golf and related operations segment.

Avalon is the majority owner of Avalon Dermatology, LLC owning 50.1 % of the company.

Avalon made capital contributions of approximately $ 0.2 million, which included building improvements and the purchases of certain equipment, in exchange for membership units of Avalon Dermatology, LLC.

In accordance with ASC 810-10 and related amendment , Avalon Dermatology, LLC is a VIE, and the financial statements of Avalon Dermatology, LLC are included in Avalon’s consolidated financial statements.

ASC 810-10 requires noncontrolling interests to be reported as a separate component of equity.

The amount of net loss attributable to the noncontrolling interest is recorded in “net loss attributable to noncontrolling interest” in our Condensed Consolidated Statements of Operations.

During both the three and six months ended June 30, 2024, net loss attributable to the noncontrolling interest in Avalon Dermatology, LLC was approximately $ 24,000 .

Injection Wells Suspension

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The company awaits a decision by the Court.

MANAGEMENT ’ S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

MANAGEMENT ’ S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion provides information which management believes is relevant to an assessment and understanding of the operations and financial condition of Avalon Holdings Corporation and its subsidiaries.

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Liquidity and Capital Resources

For the three months ended March 31, 2024, Avalon utilized existing cash and cash provided by operations and the line of credit to meet operating needs, fund capital expenditures and make required monthly payments on our term loan facility.

For the six months ended June 30, 2024, Avalon utilized existing cash and cash provided by operations and the line of credit to meet operating needs, fund capital expenditures and make required monthly payments on our term loan facility.

Cash in our project fund account and borrowings under our line of credit were also utilized to fund capital expenditures which included the continued renovation of The Grand Resort as further described below.

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The remaining proceeds of approximately $10.4 million were deposited into a project fund account for which those proceeds are to fund future costs of renovating and expanding both The Grand Resort and Avalon Field Club at New Castle.

At March 31, 2024 and December 31, 2023 the balance of “Restricted Cash” is $10.2 million and $10.3 million, respectively, and presented in the Consolidated Balance Sheets.

At June 30, 2024 and December 31, 2023 the balance of “Restricted Cash” is $10.2 million and $10.3 million, respectively, and presented in the Consolidated Balance Sheets.

The monies are earning nominal interest.

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The 2022 Term Loan also contains other nonfinancial covenants, customary representations, warranties and events of default.

Avalon was in compliance with the 2022 Term Loan Agreement covenants at March 31, 2024 and December 31, 2023.

Avalon was in compliance with the 2022 Term Loan Agreement covenants at June 30, 2024 and December 31, 2023.

Line of Credit Agreement

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Under the Line of Credit Agreement, borrowings in excess of $1.0 million are subject to a borrowing base which is calculated based off a specific level of eligible accounts receivable of the waste management business as defined in the agreement.

At both March 31, 2024 and December 31, 2023, approximately $3.2 million was outstanding under the Line of Credit Agreement.

At March 31, 2024 and December 31, 2023, approximately $1.8 million was available under the Line of Credit Agreement.

At both June 30, 2024 and December 31, 2023, approximately $3.2 million was outstanding under the Line of Credit Agreement.

At June 30, 2024 and December 31, 2023, approximately $1.8 million was available under the Line of Credit Agreement.

Outstanding borrowings under the Line of Credit Agreement bear interest at Prime Rate plus .25%.

At March 31, 2024, the interest rate on the Line of Credit Agreement was 8.75%.

At June 30, 2024, the interest rate on the Line of Credit Agreement was 8.75%.

Borrowings under the Line of Credit Agreement are secured by certain business assets of the Company including accounts receivable, inventory and equipment.

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The Line of Credit Agreement also contains other nonfinancial covenants, customary representations, warranties and events of default.

Avalon was in compliance with the Line of Credit Agreements covenants at March 31, 2024 and December 31, 2023.

During the three months ended March 31, 2024 and 2023, the weighted average interest rate on outstanding borrowings was 6.27% and 6.10%, respectively.

Avalon was in compliance with the Line of Credit Agreements covenants at June 30, 2024 and December 31, 2023.

During the six months ended June 30, 2024 and 2023, the weighted average interest rate on outstanding borrowings was 6.27% and 6.13%, respectively.

Squaw Creek Country Club Lease Agreement

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Capital Expenditures

During the three months ended March 31, 2024, Avalon incurred and paid to vendors capital expenditures in the amount of $0.4 million.

During the three months ended March 31, 2023, Avalon incurred capital expenditures of $1.2 million of which $1.1 million of such expenditures was paid to vendors during the period.

For both the three months ended March 31, 2024 and 2023, expenditures primarily related to the continued renovation of The Grand Resort and the clubhouse at Avalon Field Club at New Castle.

During the six months ended June 30, 2024, Avalon incurred and paid to vendors capital expenditures in the amount of $0.7 million.

During the six months ended June 30, 2023, Avalon incurred capital expenditures of $2.4 million of which $2.2 million of such expenditures was paid to vendors during the period.

For the six months ended June 30, 2024 expenditures primarily related to the continued renovation of The Grand Resort and Avalon Dermatology, LLC.

For the six months ended June 30, 2023 expenditures primarily related to the continued renovation of The Grand Resort and the clubhouse at Avalon Field Club at New Castle.

In 2024 and 2023, certain hotel rooms at The Grant Resort and other areas of the facility were in the process of being renovated.

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Working Capital

At March 31, 2024 and December 31, 2023, there was a working capital deficit of approximately $4.4 million and $3.9 million, respectively.

Working capital was negatively impacted primarily by an increase in accounts payable, accrued payroll, deferred membership dues revenue and other accrued liabilities.

The negative impact was partially offset by an increase in accounts receivable, unbilled membership dues receivables, inventory and prepaid assets

Accounts receivable increased to $12.3 million at March 31, 2024 compared with $9.5 million at December 31, 2023.

Accounts receivable related to our waste management services segment increased approximately $0.6 million at March 31, 2024 compared with December 31, 2023 as a result of increased billings and the timing of receipt on the receivables.

Accounts receivable related to the golf and related operations segment increased approximately $2.2 million at March 31, 2024 compared to December 31, 2023 due to an increase in membership dues and the associated timing of annual membership renewals.

Unbilled membership dues receivable was approximately $0.8 million at March 31, 2024 compared to $0.6 million at December 31, 2023.

The increase was primarily due to an increase in dues and the timing of annual membership renewals related to the Avalon Golf and Country Club and associated monthly billing over the course of the annual agreement.

Inventory was approximately $1.9 million at March 31, 2024 compared to $1.7 million at December 31, 2023.

The increase is related to merchandise, food and beverage inventory related to our golf and related operations segment.

Accounts payable was approximately $11.3 million at March 31, 2024 compared to $9.7 million at December 31, 2023.

At June 30, 2024 and December 31, 2023, there was a working capital deficit of approximately $3.1 million and $3.9 million, respectively.

Working capital was negatively impacted by an increase in deferred membership dues revenue, accounts payable and accrued payroll.

The negative impact was partially offset by an increase in cash, accounts receivable, unbilled membership dues receivable and inventory.

Accounts receivable increased to $11.5 million at June 30, 2024 compared with $9.5 million at December 31, 2023.

Accounts receivable related to the golf and related operations segment increased approximately $1.3 million at June 30, 2024 compared to December 31, 2023 due to the associated timing of annual membership renewals.

Accounts receivable related to our waste management services segment increased approximately $0.7 million at June 30, 2024 compared with December 31, 2023 as a result of an increase in net operating revenues in the second quarter of 2024 compared with the fourth quarter of 2023 and the timing of receipt on those associated receivables.

Unbilled membership dues receivable was approximately $1.1 million at June 30, 2024 compared to $0.6 million at December 31, 2023.

The increase was primarily due to the timing of annual membership renewals related to the Avalon Golf and Country Club and associated monthly billing over the course of the annual agreement.

Inventory was approximately $1.9 million at June 30, 2024 compared to $1.7 million at December 31, 2023.

The increase is related to merchandise, food and beverage inventory as a result of the increase in business operations for our golf and related operations segment.

Accounts payable was approximately $11.0 million at June 30, 2024 compared to $9.7 million at December 31, 2023.

Approximately $0.4 million of the increase in accounts payable between periods was due to the waste management segment.

Accounts payable related to our waste management segment increased as a result of the associated timing of vendor payments in the ordinary course of business.

Accounts payable related to our golf and related operations increased $0.6 million at March 31, 2024 compared to December 31, 2023, due to the associated timing of vendor payments in the ordinary course of business.

Deferred revenue relating to membership dues was approximately $5.2 million at March 31, 2024 compared to $3.4 million at December 31, 2023.

The increase in deferred revenues was primarily due to an increase in membership dues and the associated timing of annual membership renewals.

The number of members at March 31, 2024 was 5,050 compared to 4,952 at December 31, 2023.

Accrued payroll and other compensation was approximately $1.8 million at March 31, 2024 compared to $1.3 million at December 31, 2023.

The increase is primarily due to the associated timing of payment of certain earned employee incentives relating to our waste management services segment.

Accounts payable related to our golf and related operations increased $0.9 million at June 30, 2024 compared to December 31, 2023, due to an increase in golf operations along with associated timing of vendor payments in the ordinary course of business.

Deferred revenue relating to membership dues was approximately $5.9 million at June 30, 2024 compared to $3.4 million at December 31, 2023.

The increase in deferred revenues was primarily due to the associated timing of annual membership renewals and, to a lesser extent, an increase in membership dues rates during 2024.

Accrued payroll and other compensation was approximately $1.8 million at June 30, 2024 compared to $1.3 million at December 31, 2023.

The increase is primarily due to the associated timing of employee payroll payments in the ordinary course of business related to our golf and related operations.

Management believes that anticipated cash provided from future operations will be sufficient to meet operating requirements and make required monthly payments under our term loan facility.

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Growth Strategy

Waste Management Segment

Waste Management Services Segment

Our growth strategy for the waste management services segment focuses on increasing revenue, gaining market share and enhancing shareholder value through internal growth.

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Avalon’s primary business segment, the waste management services segment, provides hazardous and nonhazardous waste brokerage and management services, captive landfill management services and salt water injection well operations.

The golf and related operations segment includes the operation and management of four golf courses and related country clubs and facilities, a hotel and its associated resort amenities and a multipurpose recreation center.

Performance in the first quarter of 2024 compared with the first quarter of 2023

Performance in the second quarter of 2024 compared with the second quarter of 2023

Overall Performance

Net operating revenues increased to $18.9 million in the first quarter of 2024 compared with $18.4 million in the first quarter of 2023.

Net operating revenues of the waste management services segment were approximately $12.5 million in the first quarter of 2024 compared to $12.7 million in the first quarter of 2023.

The decrease in net operating revenues of the waste management services segment was a result of a marginal increase in continuous work but a significant decrease in event work projects during the first quarter of 2024 compared to the first quarter of 2023.

Net operating revenues of the golf and related operations segment were approximately $6.4 million in the first quarter of 2024 compared to $5.8 million in the first quarter of 2023.

The increase in net operating revenues of the golf and related operations was a result of an increase in pricing and also an increase in business operations related to both The Grand Resort and the country clubs during the first quarter of 2024 compared to the first quarter of 2023.

Total cost of operations related to the waste management services segment decreased to $9.9 million in the first quarter of 2024 compared with $10.4 million in the first quarter of 2023.

The decrease in the cost of operations between periods for the waste management services segment is primarily due to a decrease in net operating revenues as these costs vary directly with the associated revenues.

Total cost of operations related to the golf and related operations segment were $5.9 million in both the first quarter of 2024 and 2023.

The decrease in costs as a percentage of revenue between periods was primarily a result of cost cutting efforts implemented with a specific focus on reducing employee related costs.

Depreciation and amortization expense was approximately $1.0 million in the first quarter of 2024 compared to $0.9 million in the first quarter of 2023.

The increase is due to a higher depreciable asset base primarily related to the renovations at The Grand Resort.

Consolidated selling, general and administrative expenses were approximately $2.6 million in the first quarter of 2024 compared to $2.5 million in the first quarter of 2023.

Net operating revenues increased to $23.1 million in the second quarter of 2024 compared with $20.8 million in the second quarter of 2023.

Net operating revenues of the waste management services segment were approximately $12.2 million in the second quarter of 2024 compared to $10.3 million in the second quarter of 2023.

The increase in net operating revenues of the waste management services segment was a result of increases in both continuous and event work projects during the second quarter of 2024 compared to the second quarter of 2023.

Net operating revenues of the golf and related operations segment were approximately $10.8 million in the second quarter of 2024 compared to $10.5 million in the second quarter of 2023.

The increase in net operating revenues of the golf and related operations was a result of an increase in pricing and also an increase in business operations related to both The Grand Resort and the country clubs during the second quarter of 2024 compared to the second quarter of 2023.

Total cost of operations related to the waste management services segment increased to $9.5 million in the second quarter of 2024 compared with $8.2 million in the second quarter of 2023.

The increase in the cost of operations between periods for the waste management services segment is primarily due to an increase in net operating revenues as these costs vary directly with the associated revenues.

Total cost of operations related to the golf and related operations segment decreased to $8.4 million in the second quarter of 2024 compared to $8.8 million in the second quarter of 2023.

The decrease in costs as a percentage of revenue between periods was primarily a result of cost cutting efforts implemented with a specific focus on increasing profit margins.

Depreciation and amortization expense was approximately $1.0 million in both the second quarter of 2024 and 2023, respectively.

Consolidated selling, general and administrative expenses were approximately $2.7 million in the second quarter of 2024 compared to $2.5 million in the second quarter of 2023.

The increase was primarily a result of an increase in certain earned employee incentives relating to our waste management services segment

Interest expense was approximately $0.5 million for both the first quarter of 2024 and the first quarter of 2023.

During the three months ended March 31, 2024 and 2023, the weighted average interest rate on outstanding borrowings was 6.27% and 6.10%, respectively.

Net loss attributable to Avalon Holdings Corporation common shareholders was $1.0 million, or $0.25 per share, in the first quarter of 2024 compared with a net loss attributable to Avalon Holdings Corporation common shareholders of $1.7 million, or $0.43 per share, in the first quarter of 2023.

Interest expense was approximately $0.5 million in both the second quarter of 2024 and 2023, respectively.

During the three months ended June 30, 2024 and 2023, the weighted average interest rate on outstanding borrowings was 6.26% and 6.16%, respectively.

Net income attributable to Avalon Holdings Corporation common shareholders was $1.0 million, or $0.24 per share, in the second quarter of 2024 compared with net loss attributable to Avalon Holdings Corporation common shareholders of $0.2 million, or $0.04 per share, in the second quarter of 2023.

Avalon recorded a state income tax provision in both the second quarters of 2024 and 2023, which was related entirely to the waste management and brokerage operations.

Due to the recording of a full valuation allowance against the Company’s federal net deferred tax assets, the overall effective tax rate in both periods reflect taxes owed in certain U.S state jurisdictions.

Avalon’s income tax benefit on the loss before taxes was offset by a change in the valuation allowance.

A valuation allowance is provided when it is more likely than not that deferred tax assets relating to certain federal and state loss carryforwards will not be realized.

Avalon continues to maintain a valuation allowance against the majority of its deferred tax amounts until it is evident that the deferred tax asset will be utilized in the future.

Segment Performance

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Waste Management Services Segment

The net operating revenues of the waste management services segment decreased slightly to $12.5 million in the first quarter of 2024 compared with $12.7 million in the first quarter of 2023.

The net operating revenues of the waste management services were approximately $12.2 million in the second quarter of 2024 compared with $10.3 million in the second quarter of 2023.

The waste management services segment includes waste disposal brokerage and management services, captive landfill management operations and salt water injection well operations.

The net operating revenues of the waste disposal brokerage and management services business were approximately $11.8 million in the first quarter of 2024 compared to $11.9 million in the first quarter of 2023.

Event work net operating revenues decreased by approximately $0.8 million during first quarter of 2024 when compared to first quarter of 2023.

The net operating revenues of the waste disposal brokerage and management services business were approximately $11.4 million in the second quarter of 2024 compared to $9.4 million in the second quarter of 2023.

Continuous work in the waste disposal brokerage business increased by approximately $0.5 million between periods.

Net operating revenues related to continuous work were approximately $6.2 million in the second quarter of 2024 compared with $5.7 million in the second quarter of 2023.

In addition, event work net operating revenues related to multiple projects increased by approximately $1.5 million during second quarter of 2024 when compared to second quarter of 2023.

Event work is defined as bid projects under contract that occurs on a one-time basis over a short period of time.

Such work can fluctuate significantly from period to period.

Event work net operating revenues were approximately $5.2 million in the first quarter of 2024 compared with $6.0 million in the first quarter of 2023.

In addition, continuous work of the waste disposal brokerage business increased approximately $0.6 million between periods as a result of increased work from multiple customers.

Net operating revenues related to continuous work were approximately $6.6 million in the first quarter of 2024 compared with $5.9 million in the first quarter of 2023.

The net operating revenues of the captive landfill management operations were approximately $0.7 million in the first quarter of 2024 compared to $0.8 million in the first quarter of 2023.

Event work net operating revenues were approximately $5.2 million in the second quarter of 2024 compared with $3.7 million in the second quarter of 2023.

The net operating revenues of the captive landfill management operations were approximately $0.8 million in the second quarter of 2024 compared to $0.9 million in the second quarter of 2023.

The net operating revenues of the captive landfill operations are almost entirely dependent upon the volume of waste generated by the owner of the landfill for whom Avalon manages the facility.

Costs of operations related to the waste management services segment decreased to $9.9 million in the first quarter of 2024 compared with $10.4 million in the first quarter of 2023.

The decrease in the cost of operations between periods for the waste management segment is primarily due to the decrease in net operating revenues as these costs vary directly with the associated revenues.

The overall gross margin percentage of the waste brokerage and management services business was approximately 21% in the first quarter of 2024 compared to 18% in the first quarter of 2023.

The increase in the overall gross margin percentage was primarily attributable to the increased gross profit associated with continuous work during first quarter of 2024.

Income before income taxes for the waste management services segment were approximately $1.2 million in the first quarter 2024 compared with $0.9 million in the first quarter 2023.

Income before income taxes of the waste brokerage and management services business was approximately $1.2 million for the first quarter of 2024 compared to $0.9 million in the first quarter of and 2023.

The increased income before income taxes was primarily attributable to the increased gross profit in the first quarter of 2024 compared to the first quarter of 2023.

Income before income taxes of the captive landfill operations were approximately $0.1 million in both the first quarter of 2024 and 2023.

During both the first quarter of 2024 and 2023, the salt water injection wells incurred a loss before income taxes of approximately $0.1 million primarily due to legal and professional costs.

Costs of operations related to the waste management services segment were approximately $9.5 million in the second quarter of 2024 compared with $8.2 million in the second quarter of 2023.

The increase in the cost of operations between periods for the waste management segment is primarily due to an increase in net operating revenues as these costs vary directly with the associated revenues.

The overall gross margin percentage of the waste brokerage and management services business was approximately 22% in the second quarter of 2024 compared to 20% in the second quarter of 2023.

The increase in the overall gross margin percentage was primarily attributable to the higher gross profit generated from event work projects during second quarter of 2024.

Income before income taxes for the waste management services segment was approximately $1.3 million in the second quarter of 2024 compared to $0.8 million in the second quarter of 2023.

Income before income taxes of the waste brokerage and management services business was approximately $1.3 million in the second quarter of 2024 compared to $0.8 million in the second quarter of 2023.

The increase in income before income taxes was primarily attributable to an increase in net operating revenues and associated higher gross profit during the second quarter of 2024 compared to the second quarter of 2023.

Income before income taxes of the captive landfill operations were approximately $0.1 million in both the second quarter of 2024 and 2023.

During both the second quarter of 2024 and 2023, the salt water injection wells incurred a loss before income taxes of less than $0.1 million primarily due to legal and professional costs incurred relating to Avalon’s appeal and mandamus processes.

Golf and Related Operations Segment

Net operating revenues of the golf and related operations segment were approximately $6.4 million in the first quarter of 2024 compared to $5.8 million in the first quarter of 2023.

Avalon’s golf and related operations segment consists of the operation and management of four golf courses and related country clubs which provide dining and banquet facilities, a hotel which provides lodging, dining, banquet and conference facilities and other resort related amenities and a multipurpose recreation center.

Food, beverage and merchandise sales were approximately $2.0 million in both the first quarter of 2024 and 2023.

Other net operating revenues related to the golf and related operations were approximately $4.4 million in the first quarter of 2024 compared to $3.8 million in the first quarter of 2023.

Membership dues revenue was approximately $2.0 million in the first quarter of 2024 compared to $1.8 million in the first quarter of 2023.

Net operating revenues of the golf and related operations segment were approximately $10.8 million in the second quarter of 2024 compared to $10.5 million in the second quarter of 2023.

Food, beverage and merchandise sales were approximately $4.0 million in both the second quarter of 2024 and in the second quarter of 2023.

Other golf and related operation revenues were approximately $6.8 million in the second quarter of 2024 compared to $6.5 million in the second quarter of 2023.

Membership dues revenue was approximately $1.8 million in both the second quarter of 2024 and 2023.

Net operating revenues related to room rental was approximately $2.1 million in the second quarter of 2024 compared to $1.8 million in the second quarter of 2023.

The increase in room revenue was a result of both higher occupancy and an increase in average room rates when compared to the prior period.

Greens fees and associated cart rentals were approximately $1.2 million in both the second quarter of 2024 and second quarter of 2023.

Other revenues consisting of athletic, fitness, salon and spa related activities were approximately $1.7 million in both the second quarter of 2024 and in the second quarter of 2023.

Total cost of operations for the golf and related operations segment were $8.4 million in the second quarter of 2024 compared with $8.8 million in the second quarter of 2023.

Cost of food, beverage and merchandise was approximately $1.7 million in the second quarter of 2024 compared to $1.8 million in the second quarter of 2023.

The decrease in total food, beverage and merchandise costs between periods were attributed to a lower volume of product sales, however, due to price increases implemented throughout the year, the results were higher gross revenue generated and related gross profit in 2024 compared to the second quarter of 2023.

The cost of food, beverage and merchandise sales was approximately 42% of associated revenue in the second quarter of 2024 compared to 45% in the second quarter of 2023.

Golf and related operations operating costs decreased to approximately $6.7 million in the second quarter of 2024 compared with $7.0 million in the second quarter of 2023.

The decrease in operating costs between periods is primarily related to a decrease in employee related costs in the second quarter of 2024 compared to the second quarter of 2023.

The golf and related operations recorded income before income taxes of $1.1 million in the second quarter of 2024 compared with income before income taxes of $0.4 million in the second quarter of 2023.

The change between periods was primarily a result of an increase in room rental revenue, increased revenue at the salon and spa along with cost cutting efforts implemented with a specific focus on reducing employee related costs.

General Corporate Expenses

General corporate expenses were $0.9 million in both the second quarter of 2024 and 2023.

Interest Expense

Interest expense was approximately $0.5 million in both second quarter of 2024 and second quarter of 2023.

During the three months ended June 30, 2024 and 2023, the weighted average interest rate on outstanding borrowings was 6.26% and 6.16%, respectively.

Net income attributable to Avalon Holdings Corporation common shareholders was $1.0 million in the second quarter of 2024 compared to a net loss attributable to Avalon Holdings Corporation common shareholders of $0.2 million in the second quarter of 2023.

Avalon recorded a state income tax provision in both the second quarter of 2024 and 2023, which was related entirely to the waste management and brokerage operations.

Avalon’s income tax on the income before taxes was offset by a change in the valuation allowance.

A valuation allowance is provided when it is more likely than not that deferred tax assets relating to certain federal and state loss carryforwards will not be realized.

Avalon continues to maintain a valuation allowance against the majority of its deferred tax amounts until it is evident that the deferred tax asset will be utilized in the future.

Performance in the first six months of 2024 compared with the first six months of 2023

Overall Performance

Net operating revenues increased to $41.9 million in the first six months of 2024 compared with $39.3 million in the first six months of 2023.

Net operating revenues of the waste management services segment were approximately $24.7 million in the first six months of 2024 compared to $23.0 million in the first six months of 2023.

The increase in net operating revenues of the waste management services segment was a result of an increase in both event work projects and continuous work during the first six months of 2024 compared to the first six months of 2023.

Net operating revenues of the golf and related operations segment were approximately $17.2 million in the first six months of 2024 compared to $16.3 million in the first six months of 2023.

The increase in net operating revenues of the golf and related operations was a result of increased business operations related to both The Grand Resort and the country clubs during the first six months of 2024 compared to the first six months of 2023.

Total cost of operations related to the waste management services segment increased to $19.4 million in the first six months of 2024 compared with $18.6 million in the first six months of 2023.

Total cost of operations related to the golf and related operations segment decreased to $14.3 million in the first six months of 2024 compared to $14.7 million in the first six months of 2023.

The decrease in costs as a percentage of revenue between periods was primarily a result of cost cutting efforts implemented with a specific focus on increasing profit margins.

Depreciation and amortization expense was approximately $2.0 million in the first six months of 2024 compared to $1.9 million in the first six months of 2023.

The increase is due to the higher depreciable asset base primarily due to the expansion of The Grand Resort.

Consolidated selling, general and administrative expenses were approximately $5.3 million in the first six months of 2024 compared to $5.0 million in the first six months of 2023.

Increase is mainly attributed to increased incentive compensation for salesman of waste management services segment.

Interest expense was approximately $1.0 million in both the first six months of 2024 and the first six months of 2023.

During the six months ended June 30, 2024 and 2023, the weighted average interest rate on outstanding borrowings was 6.27% and 6.13%, respectively.

Net loss attributable to Avalon Holdings Corporation common shareholders was $25,000, or $0.01 per share, in the first six months of 2024 compared with a net loss attributable to Avalon Holdings Corporation common shareholders of $1.8 million, or $0.47 per share, in the first six months of 2023.

Segment Performance

Segment performance should be read in conjunction with Note 13 to the Condensed Consolidated Financial Statements.

Waste Management Services Segment

The net operating revenues of the waste management services segment increased to $24.7 million in the first six months of 2024 compared with $23.0 million in the first six months of 2023.

The net operating revenues of the waste disposal brokerage and management services business were approximately $23.2 million in the first six months of 2024 compared to $21.3 million in the first six months of 2023.

Continuous work of the waste disposal brokerage business increased by approximately $1.1 million between periods.

Net operating revenues related to continuous work were approximately $12.8 million in the first six months of 2024 compared with $11.7 million in the first six months of 2023.

Event work net operating revenues related to multiple projects increased by approximately $0.8 million during first six months of 2024 when compared to first six months of 2023.

Event work is defined as bid projects under contract that occurs on a one-time basis over a short period of time.

Such work can fluctuate significantly from year to year.

Event work net operating revenues were approximately $10.4 million in the first six months of 2024 compared with $9.6 million in the first six months of 2023.

The net operating revenues of the captive landfill management operations were approximately $1.5 million in the first six months of 2024 compared to $1.7 million in the first six months of 2023.

The net operating revenues of the captive landfill operations are almost entirely dependent upon the volume of waste generated by the owner of the landfill for whom Avalon manages the facility.

Costs of operations related to the waste management services segment increased to $19.4 million in the first six months of 2024 compared with $18.6 million in the first six months of 2023.

The overall gross margin percentage of the waste brokerage and management services business was approximately 21% in the first six months of 2024 compared to 19% in the first six months of 2023.

The increase in the overall gross margin percentage was primarily attributable to the increase in gross profit generated from continuous work during first six months of 2024.

Income before income taxes for the waste management services segment were approximately $2.4 million in the first six months of 2024 compared to $1.8 million in the first six months of 2023.

Income before income taxes of the waste brokerage and management services business was approximately $2.3 million in the first six months of 2023 compared to $1.7 million in the first six months of 2023.

The increased income before income taxes was primarily attributable to increase in both continuous and event work projects during the first six months of 2024 compared to the first six months of 2023.

Income before income taxes of the captive landfill operations were approximately $0.2 million for the first six months of both 2024 and 2023, respectively.

During both the first six months of 2024 and 2023, the salt water injection wells incurred a loss before income taxes of approximately $0.1 million primarily due to legal and professional costs incurred relating to Avalon’s mandamus processes.

Golf and Related Operations Segment

Net operating revenues of the golf and related operations segment were approximately $17.2 million in the first six months of 2024 compared to $16.3 million in the first six months of 2023.

Food, beverage and merchandise sales were approximately $6.0 million in both the first six months of 2024 and first six months of 2023.

Other net operating revenues related to the golf and related operations were approximately $11.2 million in the first six months of 2024 compared to $10.3 million in the first six months of 2023.

Membership dues revenue was approximately $3.8 million in the first six months of 2024 compared to $3.7 million in the first six months of 2023.

The increase in membership dues revenue was attributable to an increase in membership dues rates.

Net operating revenues related to room rental was approximately $1.0 million in the first quarter of 2024 compared to $0.9 million in the first quarter of 2023.

Net operating revenues related to room rental was approximately $3.0 million in the first six months of 2024 compared to $2.6 million in the first six months of 2023.

The increase in room revenue was a result of both higher occupancy and an increase in average room rates when compared to the prior period.

Other revenues consisting of athletic, fitness, salon and spa related activities were approximately $1.3 million in the first quarter of 2024 compared to $1.0 million in the first quarter of 2023.

The increase between periods was primarily due to an increase in salon and spa revenue.

Greens fees and associated cart rentals were approximately $0.1 million in both the first quarter of 2024 and 2023.

Other revenues consisting of athletic, fitness, travel agency, salon and spa related activities were approximately $3.2 million in the first six months of 2024 compared to $2.8 million in the first six months of 2023.

The increase between periods was primarily due to an increase in salon and spa revenue associated with The Grand Resort.

Greens fees and associated cart rentals were approximately $1.2 million in the first six months of 2024 and the first six months of 2023.

Total cost of operations for the golf and related operations segment were $5.9 million in both the first quarter of 2024 and 2023.

Cost of food, beverage and merchandise was approximately $1.0 million in both the first quarter of and 2023.

The cost of food, beverage and merchandise sales was approximately 51% of associated revenue in the first quarter of 2024 compared to 52% in the first quarter of 2023.

Golf and related operations operating costs was approximately $4.9 million in both the first quarter of 2024 and 2023.

The decrease in costs as a percentage of revenue between periods was primarily a result of cost cutting efforts implemented with a specific focus on reducing employee related costs.

The golf and related operations recorded a loss before income taxes of $0.8 million in the first quarter of 2024 compared with a loss before income taxes of $1.3 million in the first quarter of 2023.

The change between periods was primarily a result of an increase in membership due rates, increased revenue at the salon and spa along with cost cutting efforts implemented with a specific focus on reducing employee related costs.

Total cost of operations for the golf and related operations segment were $14.3 million in the first six months of 2024 compared with $14.7 million in the first six months of 2023.

Cost of food, beverage and merchandise was approximately $2.7 million in the first six months of 2024 compared to $2.8 million in the first six months of 2023.

The cost of food, beverage and merchandise sales was approximately 45% of associated revenue in the first six months of 2024 compared to 47% in the first six months of 2023.

Golf and related operations operating costs decreased to approximately $11.6 million in the first six months of 2024 compared with $11.9 million in the first six months of 2023.

The decrease in operating costs between periods, primarily related to employee related savings along with operational supply cost savings in the first six months of 2024 compared to the first six months of 2023.

The golf and related operations recorded income before income taxes of $0.3 million in the first six months of 2024 compared with a net loss before income taxes of $0.9 million in the first six months of 2023.

The ability to attract new members and retain members is very important to the success of the golf and related operations segment.

Avalon is continually using different marketing strategies to attract and retain members, such as local television advertising and/or various membership promotions.

A significant decline in members could adversely impact the financial results of the golf and related operations segment.

General Corporate Expenses

General corporate expenses were $1.0 million in the first quarter of 2024 compared to $0.9 million in the first quarter of 2023.

General corporate expenses were $1.9 million in the first six months of 2024 compared to $1.8 million in the first six months of 2023.

The change between periods was primarily a result of a slight increase in professional fees.

Interest Expense

Interest expense was approximately $0.5 million for both the first quarter of 2024 and 2023.

During the three months ended March 31, 2024 and 2023, the weighted average interest rate on outstanding borrowings was 6.27% and 6.10%, respectively.

Net loss attributable to Avalon Holdings Corporation common shareholders was $1.0 million in the first quarter of 2024 compared to a net loss attributable to Avalon Holdings Corporation common shareholders of $1.7 million in the first quarter of 2023.

Avalon recorded a state income tax provision in both the first quarter of 2024 and 2023, which was related entirely to the waste management and brokerage operations.

Interest expense was approximately $1.0 million for both the first six months in 2024 the first six months of 2023.

During the six months ended June 30, 2024 and 2023, the weighted average interest rate on outstanding borrowings was 6.27% and 6.13%, respectively.

Net loss attributable to Avalon Holdings Corporation common shareholders was $25,000 in the first six months of 2024 compared to a net loss attributable to Avalon Holdings Corporation common shareholders of $1.8 million in the first six months of 2023.

Avalon recorded a state income tax provision in both the first six months of 2024 and 2023, which was related entirely to the waste management and brokerage operations.

Avalon’s income tax benefit on the loss before taxes was offset by a change in the valuation allowance.

Avalon’s income tax on the income (loss) before taxes was offset by a change in the valuation allowance.

A valuation allowance is provided when it is more likely than not that deferred tax assets relating to certain federal and state loss carryforwards will not be realized.

18 unchanged sentences

Unfavorable general economic conditions could adversely affect our business and financial results

Our operations are substantially affected by economic conditions, including inflation, which can impact consumer disposable income levels and spending habits.

Economic conditions can also be impacted by a variety of factors including epidemics, pandemics and actions taken by governments to manage economic matters, whether through initiatives intended to control wages, unemployment, inflation, taxation and other economic drivers.

Our operations are substantially affected by economic conditions, including inflationary pressures, which can impact consumer disposable income levels and spending habits.

Economic conditions can also be impacted by a variety of factors including epidemics, pandemics and actions taken by governments to manage economic matters, whether through initiatives intended to control wages, increase in the Federal minimum wage, unemployment, inflation, taxation and other economic drivers.

Adverse economic conditions could pressure Avalon’s business and operating performance and financial results may suffer.

20 unchanged sentences

We continuously monitor supply and cost trends of these commodities.

During the first three months of 2023 and 2022, we experienced higher commodity costs compared to the prior year period.

During the first six months of 2024 and 2023, we experienced higher commodity costs compared to the prior year period.

These increases are primarily driven by overall market demand and inflationary pressures.

18 unchanged sentences

Our ability to comply with the financial and other covenants in our loan and security agreement may be affected by worsening economic or business conditions, or other events that may be beyond our control.

Although the Company believes that cash generated from operations will be sufficient to meet obligations under our loan and security agreement, we cannot provide assurance that our business will generate cash flow from operating activities in amounts sufficient to enable us to service debt and meet these covenants.

We cannot provide assurance that our business will generate sufficient cash flow from operating activities in amounts sufficient to enable us to service debt and meet these covenants.

We may need to refinance all or a portion of our indebtedness, on or before maturity.

70 unchanged sentences

The ability to retain current members and attract new members has been an ongoing challenge.

Although Avalon was able to increase the number of members of the Avalon Golf and Country Club, as of June 30, 2024, Avalon has not attained its membership goals.

There can be no assurance as to when such goals will be attained.

Avalon is continually using different marketing strategies to attract new members, such as local television advertising and various membership promotions.

5 unchanged sentences

As a result, Avalon’s financial performance is adversely affected by adverse weather conditions.

The Federal Reserve increased its key interest rate nine times since 2022 as consumer goods prices continue to increase.

The Federal Reserve increased its key interest rate ten times since 2022 as consumer goods prices continue to increase.

Our operations are substantially affected by economic conditions, including inflation, which can impact consumer disposable income levels and spending habits.

3 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements